It could be worse…
That’s what industry analysts are saying about out the expected decline in ad revenue due to the pandemic.
“GroupM, a unit of WPP PLC, expects ad spending in the U.S. to drop to $207.9 billion this year from $238.8 billion in 2019, excluding political-ad outlays,” writes Suzanne Vranica in The Wall Street Journal. As recently as last December, the company was forecasting U.S. ad spending would rise by 4% in this year.
As Vranica points out, advertising is often on the chopping block when budget cuts must be made … even with the growing awareness that brands that advertise during the tough times do better in the good times.
This silver lining to the forecast is the upcoming presidential election; Vranica says GroupM is predicting this will limit the overall drop to 8%. And while the pain is expected to hit across channels, TV ads are more vulnerable this time around than usual, as is print.
“Advertisers and TV networks were supposed to begin negotiating deals for the coming fall TV season this month, but large companies including Procter & Gamble Co., Bank of America Corp., and Unilever PLC are pushing for a delay,” Vranica explains. “Brands have a lack of visibility into what they would be buying since TV production has been closed and there are still questions surrounding when sports will return.”
The uncertainty is expected to linger into next year because frankly, we’ve never dealt with any quite like this; an economic recovery hinges on so many variables right now it’s hard to make any solid speculation. Adding to the concern is a heightened awareness on the part of brands to get their messaging right. Initially concerned with avoid disasterising, there’s a larger social worry now.
“The recent racial tensions and protests stemming from the killing of George Floyd while in the custody of Minneapolis police has also added to the worries of media companies dependent on advertising,” Vranica writes.
“Some brands have sought to block their ads from appearing near online news stories that carry words and phrases such as ‘Black Lives Matters,’ ‘demonstrations’ and ‘rioting,’ according to ad executives.”
With print ad revenues expecting a steep hit as well (predictions put them 26% down from last year), GroupM’s Brian Wieser shares some encouraging insights.
“The financial crisis played out over many months, if not years, and it was far more broad-reaching in terms of the businesses it had affected,” he said. This is why he and others believe the current downturn won’t be as steep as the 16% drop after 2009.
“We see a solid bounce back in ad spending in 2021 led by 20% growth in online ad spending,” said Michael Nathanson, an analyst at MoffettNathanson, in a note to investors last month.
For publishers, the mandate is clear. Do everything in your power to be a trusted advertising partner. Print is still a highly valued and trusted channel, and brands are searching for a “safe place.” Focus on your own messaging, and take this opportunity to reassess your relationship with your advertisers.